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United States securities and exchange commission logo
April 27, 2023
Nassim Usman, Ph.D.
President and Chief Executive Officer
Catalyst Biosciences, Inc.
611 Gateway Blvd
Suite 120
South San Francisco, CA 94080
Re: Catalyst
Biosciences, Inc.
Preliminary Proxy
Statement on Schedule 14A
Filed March 30,
2023
File No. 000-51173
Dear Nassim Usman:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Preliminary Proxy Statement on Schedule 14A filed March 30, 2023
Letter to Stockholders, page 1
1. Provide prominent
disclosure about the legal and operational risks associated with BC
being based in and
having the majority of its operations in China. Your disclosure should
make clear whether
these risks could result in a material change in the combined
company's operations
and/or the value of its securities or could significantly limit or
completely hinder its
ability to offer securities to investors and cause the value of
its securities to
significantly decline or be worthless if the business combination is
executed. Your
disclosure should address how recent statements and regulatory actions by
China s government,
such as those related to the use of variable interest entities and data
security or
anti-monopoly concerns, have or may impact the combined company s ability
to conduct its
business, accept foreign investments, or list on a U.S. or other foreign
exchange following the
business combination.
Nassim Usman, Ph.D.
Catalyst Biosciences, Inc.
April 27, 2023
Page 2
2. Please prominently disclose whether the auditor for the PRC-operations
portion of the
combined company s audit would be subject to the determinations
announced by the
PCAOB on December 16, 2021 and whether and how the Holding Foreign
Companies
Accountable Act and related regulations will affect the combined
company. In addition,
disclose that trading in your securities may be prohibited under the
Holding Foreign
Companies Accountable Act if the PCAOB determines that it cannot
inspect or investigate
completely your auditor, and that as a result an exchange may
determine to delist your
securities.
3. Provide a description of how cash is transferred through BC's
organization and disclose
your intentions to distribute earnings. Regarding BC, state whether
any transfers,
dividends, or distributions have been made to date between the holding
company, its
subsidiaries, or to investors, and quantify the amounts where
applicable. Provide a cross-
reference to the consolidated financial statements.
4. Where discussing the transaction consideration in the fourth paragraph
of the letter to
stockholders, please include the valuation expressed as a dollar
figure, as you have done
on page 3.
5. Where discussing the percentages of outstanding shares to be held
post-Contribution,
please clearly state that the pre-Contribution Catalyst stockholders
will go from owning
83.4% of outstanding shares, as shown on the organizational chart on
page 18, to owning
2.5% and 2.0%, the latter taking into consideration the conversion of
Convertible
Preferred Stock and the outstanding options of Catalyst and Gyre
Options to be granted.
Questions and Answers About the Contributions
Who will be the executive officers of the combined company..., page 4
6. Please revise the table listing the executive officers of the combined
company to indicate
from which pre-Contribution entity each individual originates.
Catalyst Bioscience, Inc., page 9
7. We note your statement that a Phase 1 clinical trial of Hydronidone was
completed in the
U.S.; however, you also state that the company does not anticipate
filing an IND for the
treatment of NASH in the U.S. until late 2023. Please revise your
disclosure to clarify
whether an IND was filed with the FDA prior to commencement of the
referenced Phase 1
clinical trial. In addition, we note your statements that Catalyst plans
to commence a
FirstName LastNameNassim Usman, Ph.D.
Phase 2a proof-of-concept clinical study. However, it remains unclear
whether the
Comapany NameCatalyst
company has engagedBiosciences, Inc. and has received approval to
progress as described.
with the FDA
Please
April 27, 2023explain.
Page 2
FirstName LastName
Nassim Usman, Ph.D.
FirstName LastNameNassim Usman, Ph.D.
Catalyst Biosciences, Inc.
Comapany
April NameCatalyst Biosciences, Inc.
27, 2023
April 327, 2023 Page 3
Page
FirstName LastName
Summary of the Proxy Statement
The Companies, page 9
8. Disclose each permission or approval that you, your subsidiaries, BC
or its subsidiaries
are required to obtain from Chinese authorities to operate their
businesses and to offer
securities. State whether you, your subsidiaries, BC or its
subsidiaries are covered by
permissions requirements from the China Securities Regulatory
Commission (CSRC),
Cyberspace Administration of China (CAC) or any other governmental
agency that is
required to approve your or BC s operations, and state affirmatively
whether you and BC
have received all requisite permissions or approvals and whether any
permissions or
approvals have been denied. Please also describe the consequences to
you and your
investors if you, your subsidiaries, BC or its subsidiaries: (i) do
not receive or maintain
such permissions or approvals, (ii) inadvertently conclude that such
permissions or
approvals are not required, or (iii) applicable laws, regulations, or
interpretations change
and you are required to obtain such permissions or approvals in the
future.
Beijing Continent Pharmaceuticals Co., Ltd, page 10
9. Provide a clear description of how cash is transferred through BC s
organization. Disclose
your intentions to distribute earnings after the business combination.
Quantify any cash
flows and transfers of other assets by type that have occurred between
the holding
company and BC's subsidiaries, and direction of transfer. Quantify any
dividends or
distributions that a subsidiary have made to the holding company and
which entity made
such transfer, and their tax consequences. Similarly quantify
dividends or distributions
made to U.S. investors, the source, and their tax consequences. Your
disclosure should
make clear if no transfers, dividends, or distributions have been made
to date. Describe
any restrictions on foreign exchange and BC s ability to transfer
cash between entities,
across borders, and to U.S. investors. Describe any restrictions and
limitations on BC s
ability to distribute earnings from the company, including its
subsidiaries, to the parent
company and U.S. investors.
10. We note the following statement on page 10: "The prevalence of IPF in
the PRC increased
from 83,002 in 2017 to 131,654 in 2022..." Please revise this
statement to clarify the
meaning of the numbers cited (i.e., number of cases, number of new
patients, etc.).
11. Please remove the statement on page 10 that the company may "quickly
obtain marketing
approvals" for the treatment of rare diseases and further expand the
use of drugs, as the
timing of regulatory approvals is not within the company's control and
cannot be
predicted.
12. We note the disclosure on page 10 that Hydronidone was granted
Breakthrough Therapy
designation by the CDE in March 2021. Please define "CDE" here and
disclose that your
Breakthrough Therapy designation does not increase the likelihood that
Hydronidone will
ultimately receive approval.
Nassim Usman, Ph.D.
FirstName LastNameNassim Usman, Ph.D.
Catalyst Biosciences, Inc.
Comapany
April NameCatalyst Biosciences, Inc.
27, 2023
April 427, 2023 Page 4
Page
FirstName LastName
13. We note disclosure both here and elsewhere throughout the proxy
statement stating or
inferring that Catalyst and BC s product candidates are or may be
considered safe and/or
effective. For example, we note statements that product candidates
have promising
efficacy, potential efficacy, and favorable safety.
Please note that determinations of
safety and efficacy are solely within the authority of the FDA and
comparable regulatory
bodies; therefore, please revise your prospectus to remove all
references and/or
implications of safety and efficacy for unapproved product candidates.
You may
summarize data and findings of studies and trials conducted without
drawing conclusions
as to these matters.
The Contributions, page 12
14. Disclose that trading in the post-Contribution company's securities
may be prohibited
under the Holding Foreign Companies Accountable Act if the PCAOB
determines that it
cannot inspect or investigate completely your auditor, and that as a
result an exchange
may determine to delist your securities. Disclose whether the auditor
responsible for the
combined company s PRC-operations would be subject to the
determinations announced
by the PCAOB on December 16, 2021.
15. Please advise us of the exemption you are relying on for the issuance
of Catalyst shares
pursuant to the Contributions.
Organizational Structure, page 18
16. Please provide the following in this section:
an organizational chart illustrating BC s structure before the
Contributions;
graphically indicate how GNI USA, Inc. relates to the shown
entities;
explain the difference between BJ Continent Pharmaceuticals
Limited and BC in the
post-Contribution chart, as your disclosure does not clearly
discuss two separate
entities for BC;
indicate who holds the remaining 30.3% of BC post-Contribution.
17. In reference to footnote 2 to the chart, please revise to define
"Entities" here rather than
referencing the Business Combination Agreement.
Interests of Certain Directors, Officers and Affiliates of Catalyst and the
Contributors
Interests of Catalyst, page 19
18. Please quantify the dollar value of the grants of awards of fully
vested stock options under
the 2023 Omnibus Incentive Plan to be granted to Nassim Usman, Seline
Miller and
Thomas Eastling, as discussed on page 19.
Risk Factor Summary, page 21
19. Please revise here to describe the dilutive effects to existing
Catalyst stockholders of the
issuance of stock pursuant to the Contributions.
Nassim Usman, Ph.D.
Catalyst Biosciences, Inc.
April 27, 2023
Page 5
20. Please disclose here the risk that the holders of Catalyst Convertible
Preferred Stock could
be entitled to require Catalyst to redeem, in cash, the shares of
common stock underlying
its Catalyst Convertible Preferred Stock, causing substantial doubt
about Catalyst s ability
to continue as a going concern within one year from the filing of this
proxy statement.
21. In your summary of risk factors, disclose the risks your corporate
structure and being
based in or having the majority of the company s operations in China
after the business
combination poses to investors. In particular, describe the
significant regulatory, liquidity,
and enforcement risks with cross-references to the more detailed
discussion of these risks
in the proxy statement. For example, specifically discuss risks
arising from the legal
system in China, including risks and uncertainties regarding the
enforcement of laws and
that rules and regulations in China can change quickly with little
advance notice; and the
risk that the Chinese government may intervene or influence the
combined
company's operations at any time, or may exert more control over
offerings conducted
overseas and/or foreign investment in China-based issuers, which could
result in a
material change in the combined company's operations and/or the value
of its securities.
Acknowledge any risks that any actions by the Chinese government to
exert more
oversight and control over offerings that are conducted overseas
and/or foreign investment
in China-based issuers could significantly limit or completely hinder
the combined
company's ability to offer or continue to offer securities to
investors and cause the value
of such securities to significantly decline or be worthless.
Catalyst stockholders may not realize a benefit from the Contributions
commensurate with the
ownership dilution . . . ., page 29
22. Please revise here to disclose the amounts and sources of dilution
pursuant to the
Contributions.
Risks Related to BC s Business Operations in the PRC
The Chinese government may intervene in or influence BC's operations at any
time, which could
result in a change in BC's operations., page 87
23. Please revise here to disclose that the risks discussed under this
heading could
significantly limit or completely hinder the combined company s
ability to offer or
continue to offer securities to investors and cause the value of such
securities to
significantly decline or be worthless.
24. We note your disclosure on page 250 where you discuss the CSRC published
Trial
FirstName LastNameNassim Usman, Ph.D.
Measures. Please disclose how, if at all, the Trial Measures apply to
this transaction,
Comapany NameCatalyst
whether Biosciences,
you and relevant partiesInc.
to this transaction have complied with
the obligations
under the Trial
April 27, 2023 Page 5 Measures, and the risks to investors of non-compliance.
FirstName LastName
Nassim Usman, Ph.D.
FirstName LastNameNassim Usman, Ph.D.
Catalyst Biosciences, Inc.
Comapany
April NameCatalyst Biosciences, Inc.
27, 2023
April 627, 2023 Page 6
Page
FirstName LastName
Risks Related to the Combined Company
The certificate of incorporation and bylaws of the combined company will
provide that the Court
of Chancery of the State of Delaware . . . ., page 101
25. We note that your forum selection provision of the combined company
will identify the
Court of Chancery of the State of Delaware as the exclusive forum for
certain litigation,
including any derivative action. Please disclose whether this
provision will apply to
actions arising under the Securities Act or Exchange Act. In that
regard, we note that
Section 27 of the Exchange Act creates exclusive federal jurisdiction
over all suits brought
to enforce any duty or liability created by the Exchange Act or the
rules and regulations
thereunder, and Section 22 of the Securities Act creates concurrent
jurisdiction for federal
and state courts over all suits brought to enforce any duty or
liability created by the
Securities Act or the rules and regulations thereunder. If the
provision applies to Securities
Act claims, please also revise your proxy statement to state that
there is uncertainty as to
whether a court would enforce such provision and that investors cannot
waive compliance
with the federal securities laws and the rules and regulations
thereunder. If this provision
does not apply to actions arising under the Securities Act or Exchange
Act, please also
ensure that the exclusive forum provision in the governing documents
states this clearly,
or tell us how you will inform investors in future filings that the
provision does not apply
to any actions arising under the Securities Act or Exchange Act.
The Contributions
Catalyst's Background of the Contributions, page 114
26. Please revise here to discuss the negotiations between the parties
leading to Nassim
Usman, Ph.D. remaining as a director and Seline Miller remaining as an
executive officer
of the combined company.
Opinion of Catalyst's Financial Advisor, page 118
27. Please revise here to disclose whether there were any material changes
made to the draft
documents reviewed by Raymond James disclosed on page 119. If so,
disclose those
changes.
28. We note you state here that the Raymond James fairness opinion is
attached to this proxy
statement as Annex C. Annex C appears to be an accounting consent and
the full text of
the opinion does not appear elsewhere in the proxy statement. Please
attach the opinion to
the proxy statement or otherwise advise.
29. Please revise your disclosure to summarize Raymond James discounted
cash flow
analysis and any other valuation analyses conducted in preparation for
rendering
the fairness opinion. Please also summarize the projections provided
to Raymond James
and used in reaching the fairness determination and disclose the
assumptions and bases
relied related thereto.
Nassim Usman, Ph.D.
FirstName LastNameNassim Usman, Ph.D.
Catalyst Biosciences, Inc.
Comapany
April NameCatalyst Biosciences, Inc.
27, 2023
April 727, 2023 Page 7
Page
FirstName LastName
30. Please revise to quantify the amount of compensation paid by Catalyst
to Raymond James
and its affiliates over the past two years.
The Business Combination Agreement
Conditions to the Completion of the Contributions, page 137
31. We note you disclose here that conditions to the completion of the
contributions are
subject to the satisfaction or waiver by each of the parties. Please
revise to state which
conditions may be waived and revise your Risk Factors if applicable.
Catalyst's Business
Summary, page 193
32. We note your statement that Hydronidone performed better than
Pirfenidone at
comparable dose in the murine NASH model. Please revise your
disclosure to provide
information regarding any head-to-head trials conducted comparing
Hydronidone to
Pirfenidone directly. If head-to-head trials were not conducted,
please remove this
statement and any similar comparisons.
Hydronidone Pre-Clinical Development in NASH, page 198
33. We note you plan to use clinical data obtained in the recently
completed Phase 2 clinical
study of Hydronidone conducted by BC in the PRC. Please revise here to
disclose the
FDA may not accept the data from this clinical study and provide risk
factor disclosure
that the FDA may require you to conduct additional trials if it does
not accept data from
BC s clinical study or believes that additional data is necessary to
supplement your
clinical study data.
Intellectual Property, page 200
34. Please revise page 201 to disclose all jurisdictions related to the
granted patents for your
first and second patent families. Please also include the expiration
dates or years of each.
Our Clinical-Stage Product - Hydronidone: A Drug to Reverse Liver Fibrosis
Associated with
CHB, page 218
35. Please remove your statement that Hydronidone is expected to remain
the only approved
anti-fibrosis drugs for the treatment of CHB in the PRC, for at least
a few years after
approval, according to Frost & Sullivan" as such statement is
premature at this stage of
development and implies not only that regulatory approval will be
obtained, which is
outside of the control of the company and unknown, but also that no
competitors will
develop competing products in the interim.
Phase 2 Study of Hydronidone for liver fibrosis associated with CHB in the PRC,
page 220
36. Please expand BC s discussion of the SAEs observed in the Phase 2
study of Hydronidone
to describe the SAEs.
Nassim Usman, Ph.D.
Catalyst Biosciences, Inc.
April 27, 2023
Page 8
F573: Potential Category 1 New Drug for ALF/ACLF, page 221
37. Please revise here to summarize the results of the Phase 1 clinical
trial for F573. To the
extent results are not yet available, state when BC expects to receive
them. Regarding the
Phase 2 trial, disclose the trial design, primary and secondary
endpoints.
Our Preclinical-Stage Product Candidates, page 222
38. Please revise your discussion of the F528 and F230 preclinical studies
to state whether
results you refer to are statistically significant.
Intellectual Property, page 232
39. Please revise this section to disclose the type of patent protection
(e.g., composition of
matter, use, or process) and the expected expiration dates, on an
individual or patent
family basis, for all material patents owned by BC.
BC Management's Discussion and Analysis of Financial Condition and Results of
Operations,
page 260
Results of Operations, page 264
40. We note from page F-57 that BC's trade receivables increased 70%
during 2022, as
compared to an increase of 21% in total RMB revenues. Please explain
the reason(s) for
why trade receivables have increased at a significantly faster rate
than revenues. Quantify
how much of the balance has been collected subsequent to December 31,
2022.
41. As disclosed on page 265, we note that BC's gross profit margin has
approximated 96% in
each of the last two years. Please revise the disclosure to explain
how BC has maintained
such a high level of gross profit margin and/or why raw materials and
the remaining
components of cost of sales, if applicable, is so low. Additionally,
describe any known
trends or uncertainties that have had or that are reasonably likely to
have a material
favorable or unfavorable impact on revenues or gross profit margins.
Refer to
Item 303(b)(2)(ii) of Regulation S-K.
BC Financial Statements, page F-32
42. Based on the disclosures discussed on pages 94-95 and 248-249 regarding
restrictions on
the ability of BC's Chinese subsidiaries to remit sufficient foreign
currency to offshore
FirstName LastNameNassim Usman, Ph.D.
entities for such offshore entities to be able to pay dividends, make
other payments or
Comapany NameCatalyst
otherwise Biosciences,
satisfy BC's Inc.
foreign-currency-denominated obligations,
please address the need
for BC to provide
April 27, 2023 Page 8 the Schedule I per Rule 5-04(c) of Regulation
S-X.
FirstName LastName
Nassim Usman, Ph.D.
FirstName LastNameNassim Usman, Ph.D.
Catalyst Biosciences, Inc.
Comapany
April NameCatalyst Biosciences, Inc.
27, 2023
April 927, 2023 Page 9
Page
FirstName LastName
11. Intangible Assets, page F-55
43. We note product development in progress accounts for most of the
intangible assets
balance. It is not clear to us why such costs are classified as
intangible assets. Please
identify the transactions that have resulted in these amounts and/or
address why these
costs, referring to the disclosure on page F-39, are not accounted for
as inventories.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Jenn Do at 202-551-3743 or Lynn Dicker at 202-551-3616
if you have
questions regarding comments on the financial statements and related matters.
Please contact
Daniel Crawford at 202-551-7767 or Laura Crotty at 202-551-7614 with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Life
Sciences
cc: Stephen B. Thau, Esq.